The Dow's Record High Is Distracting Everyone From The Huge Story Developing In Italy

During the Italian election weekend two weeks ago, I watched all
three Godfather films on a local station. Very convenient, since
they can teach you quite a bit about Italy, even if you've seen
them a dozen times already in the past. The abdication of the
pope sort of rounded off the history lesson, and I was thinking:
OK, now I'm good to go.

After the results came in and Beppe Grillo and the Five Star
movement (M5S) became the single biggest "party", I was going to
simply repost my February 10 article Beppe Grillo Wants To Give
Italy Democracy, in which I wrote about my
meeting with Beppe and the ideas we talked about which I took
away from that. He had won big, but it was clear that most people
still had no idea who he is.

But after reading through the lazy sloppy "journalism" in the
international press in the days following the elections, it was
obvious that wouldn't have been sufficient anymore. Hardly anyone
seems to know who Beppe Grillo is, and more importantly, they
don't seem to care. In their minds, because everybody else does
it, they are fine calling him a clown, a dictator and (Italian
paper Gazetta Del Sud) a "foul-mouthed rabble rouser". Much
easier, because it doesn't require any research.

At the very least, whether you work for a major international
news organization or a national paper, if you want to stay on the
safe side, since deep down you know you haven't done your
homework, "populist" looks like an acceptable sort of
name-calling. Now, one of the definitions of populist is someone
who opposes elites, which certainly applies to Grillo, but these
days you can't use the term without implying someone who appeals
to the base instincts of the IQ challenged part of the
population. And that definitely does not apply. If only because
in Italy, Berlusconi's got that demographic covered.

The name of the game seems to be that Grillo is bad news because
he "unnerves" markets and investors. For one thing, he himself
would be only too happy with that. Not because he wants mayhem,
but because he thinks that what there is now is not working.
Grillo's first and main objective is to rid Italy of the
corruption it has been suffering from for ages (which is why the
Godfather series is enlightening), so if you want to understand
or perhaps even judge him you will first need to look at that
whole chapter. And yes, it's true, he sees the entire political
system in Rome as an integral part of that corruption, and so it
will have to go. As he put it:

"Who makes up a criminal conspiracy? If you go and look,
[you'll find] they are made up of bankers, politicians, judges
and, just perhaps, once in a while, a criminal."

What is happening in Italy as a consequence of its relationship
with the EU and the Eurozone is in Grillo's eyes also the result
of the corrupt system (since it's all been agreed to by the
career politicians who sit in parliament, for all sides of the
spectrum). Therefore, he questions the benefits for the Italian
people of the existing situation. That's all. And that's enough
for both Brussels and Rome to vilify him. Nobody is supposed to
question the glory of Europe and the Euro, and hardly anyone
does, certainly not the press, presumably because nobody wants to
unnerve the markets. But if you ask me, if anything needs to be
questioned, it's that one-dimensional religion that says the Euro
is the only way to achieve fulfillment.

I've never said I want to be in or out of the euro. I said I
want correct information. I want a Plan B for survival for the
next 10 years. And then, with a referendum we decide. The costs
and benefits, let’s know what are they are. But first you need to
inform.

If you just hint that you want to leave the euro, you're
crazy. There’s no dialogue. Just hint, and you’re a demagogue,
you’re crazy, you want to drag Italy to default, you’re
irresponsible. Just because you say, let’s think about this, what
would really happen?

For the Europhiles, the Merkel Monti Draghi Van Rompuy clan,
there is no Plan B. Or perhaps I should say it's the plan whose
name shall not be mentioned. And that's untenable; you can do
that sort of thing as long as you throw enough bling at people,
but when you start taking it away from them, they'll come looking
for answers and explanations. There simply comes a point when
unnerving the people will trump unnerving the markets.

First, let's get up to date with Italy's economy, to get a better
idea of the backdrop against which the Five Stars have risen. On
Friday, Fitch downgraded Italian debt. President Napolitano has
until March 15, the new parliament, to start pressuring for a new
government. Since he's about to resign, he can't call new
elections. Beppe Grillo has called for his long term supporter,
Nobel literature laureate Dario Fo, to be appointed the new
president.

Grillo has rejected calls to close a deal with Bersani's existing
left wing coalition, as he always said he would. Napolitano could
try to get a new technocrat government in place (Corrado Passera,
Monti's industry minister is named as a new PM), or he could call
on Bersani and Berlusconi to work together. Ironically, the main
reason for Italy to have a government would be to make sure the
Troika austerity demands keep being met, and if that doesn't
work, to file for a new bailout. Whichever choice Napolitano
makes, it appears certain it will be short-lived.

"Italy is a nation of tricksters. Yesterday I was in Rome. I
got on a bus and stamped my ticket: 'Click. Clack.' The driver
turned round and said: 'What the fuck's that noise?!'"

The Italian economy contracted 2.4% in 2012, almost twice as much
as Spain. Italy's public debt is €2 trillion, or $2.6 trillion,
predicted to rise to 130% of GDP this year, the highest level in
100 years. Also in 2012, more than 360,000 Italian businesses
folded as a result of what business lobbying group Confindustria
labeled a "credit crunch": on the one hand banks refuse loans, on
the other Monti's tax increases and spending cuts squeeze like a
vice. Italy’s official unemployment rate hit a 11.7% record in
January, the government said last week, with youth unemployment
rising to 38.7%. And that's just the macro numbers; the real
story lies beneath the surface. Like here:

More than 65% of Italian families cannot make it to the end
of the month with their current salaries, a report by the Bank of
Italy said on Tuesday. The alarm launched by the country's
central bank said that those hardest hit are young families and
renters whose monthly income is not sufficient to cover living
expenses.

Also, in Italy a huge number of young adults live with their
parents, like for instance over 70% of men and 50% of women
between 25 and 29 years old, and more than half between 18 and
34, lived "at home" in 2010. While part of that is due to
stronger family bonds than in other countries, it's much more
importantly an indication of just how poorly the economy is
doing. In comparison, in France just 10% of the same age group
live with their parents.

Of course you can glaze over these numbers, they're just more of
the same. Where it gets interesting is when you try to see what's
comings next. The Italian economy is bad and getting worse, and
the only answer the troika has ever had is double or nothing, in
other words: more austerity, more cuts and higher taxes. And that
will have to stop somewhere; it should certainly not come as a
surprise that Italians vote for someone who says it can be done
differently.

It seems clear that no matter what government is tinkered
together, Italy will have new elections relatively soon, perhaps
late this year. But even before then, Beppe Grillo will demand
changes. He will demand a clean-up of parliament, prosecution of
the corrupt part of society, and a clean and clear vote of the
people in issues like the Euro.

More ominously for the Italian and European status quo, he will
launch a nationwide discussion about what to do with the 130% of
GDP, $2.6 trillion debt. He's made clear that in his (accountant)
mind, restructuring and default should be on the agenda, in
correlation with large scale nationalization of the banking
industry. That is the time bomb that has started ticking in
Europe when the election results came in. The idea is simply what
I've said earlier about Greece: if you know you're going to be
miserable whatever you do, you might as well make sure it's your
own misery, and under your own control.

At this point it's hard to say what's more likely, Grillo being
murdered and renditioned or more Grillo's raising their heads in
other European countries. The more time he gets, the more he will
get done. And others will see that and try to copy it. And he's
right, the internet does open a whole new set of democratic
opportunities. That may be perceived as more urgent in Italy's
corruption-rotten state, but why would Spain, Greece and Portugal
not follow? Because they have no angry comedians?

The EU meanwhile needs to deal with Cyprus, a hard nut to crack,
since Dutch, German and Finnish taxpayers must be forced to bail
out Russian oligarchs who have billions in funds stashed in
bankrupt Cypriot banks. What's been below the surface thus far is
that Brussels has a next case to contend with: Slovenia's
government fell last week over economic issues, and it's a -
small - Eurozone country. Bulgaria's government is also gone, but
they're "only" EU, not Eurozone.

Nothing like a perfect storm to unnerve financial markets. Which
brings me to the Dow. Which is setting records. And I find that
peculiar: while pundits try to make us believe these records stem
from an economic recovery stateside, when I look at this graph,
part of a presentation by Jim Boswell, I just don't see it:

As is obvious from this graph, trading volume on the NYSE is so
low it feels like some kind of singularity is upon us. It’s down
at least 50% from the average of the preceding years, and last
year doesn’t even have a temporary peak anymore. But prices set
records? Really? What other assets are there for which prices go
up as trade goes down? Well, yeah, scarcity can do that perhaps,
but that's not the case here. It all looks very volatile to me.
It's easier to prop up prices at low volumes, but they can fall
much faster too when whoever it is that still remains in the
market goes away. Because he's found out to hold mainly zombie
money, for instance.

So to answer the question what's more important to you: I sure
wouldn't pick the Dow. That records thing could be over tomorrow.
Beppe Grillo's new democracy, though, has a long way to go. The
more the owning class tries to squeeze, the more the debt slaves
will demand a vote. They don't even need to gather in streets and
squares anymore, they have representation in parliament. From
that same Time interview:

Are you afraid that if you don’t succeed, the same energy that
pushed you up could push up darker forces?

If we fail, [Italy] is headed for violence in the streets.
But if we crumble, then they come. Everything started in Italy.
Fascism was born here. The banks were born here. We invented
debt. The mafia, us too. Everything started here. If violence
doesn’t start here, it’s because of the movement. If we fail,
we’re headed for violence in the street. Half the population
can’t take it anymore.

I think he may just be right. That movements like this are the
only remaining chance at solving this peacefully. That alone
should be worth a lot more than keeping a contraption like the
Eurozone together. The problem is, it's not the ruling religion.
Anyone know any German comedians? Do they even have any?

Life has become a show at which we are the audience –
and have to buy a ticket.Beppe Grillo